Today, Chinese manufacturers in virtually all industries can offer a wide range of ‘catalog products’, or ODM (Original Design Manufacturing) products, serving as a ‘ready made template’. You can choose to buy the ODM product as a no name product, or have it branded with your company logo. You can even make small modifications, including the change of colors, materials and functions.
For many buyer’s it doesn’t make sense to buy an OEM (Original Equipment Manufacturing) product, unless an entirely new design is the only way to realize a certain product concept. For many buyers, especially Startups and SME’s with limited budgets, it makes much more sense to buy ODM products. In fact, it’s often the only option. In this article, we explain the top 5 benefits of importing ODM products from China.
1. ODM products can be customized
For material, components and software, the dynamics are exactly the same as for OEM products. Contract manufacturers don’t set any specific rules as to what buyers can and cannot do with the design. Thus, an ODM product serves as a ‘ready made’ template, that can be customized to a large degree. How large depends on the product, as outlined the template below:
|Product Category||Customization Options|
|Apparel & Textiles||
3. Components (e.g. zippers and buttons)
5. Print and embroidery
1. Components (e.g. sensors and transmitters)
2. Print and engraving
1. Watch Face (e.g. layout, colors and material)
2. Watch Case Plating (e.g. Rose gold)
4. Backplate engraving
1. Components (e.g. gemstones, metallic parts and wire)
|Furniture & Home Products||
1. Materials (e.g. wood)
2. Fabrics and leather (e.g. sofa covers)
3. Components (e.g. steel fittings)
4. Print and stamping
To some extend, an ODM product is always tweaked to suit the buyer’s needs. As mentioned, Chinese manufacturers consider themselves as workshops, offering a production platform. If you fail to specify clear product details, including materials and components, the supplier fills in the gaps for you. Letting the supplier make such key decisions is rarely a wise choice.
It’s therefore critical that you confirm all customization options, regardless of whether or not you intend to actually make any modification to the ‘standard specification’, assuming the supplier even has one. Sure, I guess that many would say that such products cannot even be defined as ODM, but just for the sake of making things simple, I prefer to stick to the following:
- OEM: Any product requiring custom designed casing, PCBs and/or non-standard materials
- ODM: Any product based on a ‘ready made’ design template, made using existing tooling and standard materials / components.
2. Cuts the product development time in half
In some industries, buying an ODM product is often the only choice of Startups and SME’s lacking extensive technical expertise. Take electronics for example. No Shenzhen manufacturer would even consider making new 3D casing and PCB designs based on a general requirements list provided by the buyer. Instead, they expect this to be provided by the buyer.
When you buy ODM products, you are no longer required to produce as much material as is required when buying a custom designed products. That alone can easily save you months in product development time. This is not only relevant to importers of consumer electronics, but also apparel and textiles, as new designs often require several revisions before a design is ready for mass production.
3. Vastly reduced tooling costs
Custom designed products require additional tooling, such as injection molds. Such tooling is obviously not free, and it’s always the buyer that finance any additional tooling required to produce an OEM design. An injection mold can cost anywhere between $150 to $50,000, depending on the design, material and dimensional tolerances.
However, you don’t need to pay for molds that are already in use, which is the case for ODM products. Thus, an ODM product can save you anything from a few hundred, to tens of thousands of dollars.
4. Lower Minimum Order Quantity requirements for ODM products
From the supplier perspective, it’s far easier to produce ODM, as compared to OEM designs. It’s less time consuming, and also less risky, as the supplier is already experienced with the specific design. In addition, the supplier can use their existing materials and components subcontractors, rather than being forced to search for new ones.
As such, the supplier can offer a reduced MOQ for ODM products, as compared to OEM products. That being said, the MOQs specified by the suppliers on Alibaba, Globalsources and other supplier directories are often those valid for ODM products, so don’t expect anything lower than what’s being advertised. Yet, an OEM product may force the supplier to vastly increase the MOQ to several thousands of pieces per SKU, making that an even less viable option for many Startups and Small Businesses importing from China.
5. Wide selection of existing ODM products
Perhaps the biggest reasons why many businesses shifts from purchasing OEM to ODM products is that Chinese manufacturers can offer a more extensive selection of ‘ready made’ designs.
Yet, Chinese manufacturers are still not champions of innovation, and their ODM products are largely based on those from their own buyers, and competitors. This also raises other questions, in particular about design and software patents. Obviously, importing counterfeits is illegal, but companies – inside and outside of China – replicate designs elements and functions from competitors all the time. However, in many cases, it’s hard to draw the line.
A few more things to consider when importing ODM products
As already explained in this article, buying ODM products is not an excuse for relaxing the due dilligence and quality assurance process. You may go ahead and select ODM products directly from a supplier’s catalog or website, but confirm all technical specifications (usually, there are several options for each specification) before an order is placed. As most businesses want to brand ODM products with their own logo, you must also provide the following:
- Logo file (.ai format)
- Pantone colors